Huarun Integrates Tesco: Retail Industry Is "Hard To Make Money"

< p > "no bad industry, only unprofitable enterprises." The traditional retail business environment is getting worse and worse. Huarun's CEO Hong Jie still insists on integrating and expanding. In May 29th, Huarun Wanfang parent company Huarun announced that its joint venture agreement with the British Tesco has been approved by the relevant Chinese authorities. The two sides have completed the joint venture in May 28th. < /p >
< p > the sales volume of the newly established joint venture is expected to reach 10 billion pounds, or about 95 billion yuan. According to the twenty-first Century economic report from Huarun Wanjia learned that the start of asset integration started in April this year, the whole process will last two years, if the progress is good, by April 2016, Tesco China's 135 "Tesco" stores will be changed to "Huarun 10000", "Lok" assets, personnel and management system will be integrated into the Huarun system. < /p >
< p > this integration is crucial to the Huarun system. Close to the analysis of the Huarun industry, the retail business accounts for 65% of the total business of Huarun, and the good cash flow and customer resources of the retail industry is an important foundation for Huarun's financial business. But the retail business "making money difficult" has become more prominent in the past two years. Large-scale acquisition integration is the key driving force to maintain the continued growth of the "a href=" http://www.91se91.com/news/index_c.asp "retail sector < /a". < /p >
< p > < strong > asset integration details < /strong > < /p >
< p > August 2013, Huarun's founder and Tesco's parent company Tesco signed a memorandum on the integration of China's retail business. After nearly two months of due diligence, the two sides reached an agreement on establishing a joint venture in October last year. < /p >
< p > according to Hong Jie, Huarun venture and British Tesco each have the rights of 80% and 20% of the joint venture. The joint venture owns all retail businesses of Huarun venture and < a href= "http://www.91se91.com/news/index_c.asp" > Tesco < /a > China business and cash. < /p >
< p > in the first half year of the establishment of the new joint venture company, Huarun 10000 completed the a href= "http://www.91se91.com/news/index_c.asp" acquisition project < /a > integration plan in three stages, including the basic understanding and the mid term shop inspection. By the end of last year to the end of March this year, Huarun had made the final personnel screening, integration and loss reduction plan for Tesco. < /p >
< p > according to the plan, this year, in April 1st this year, we completed the total integration of Huarun million to Tesco in three stages. The first phase to the end of this year, Huarun Wan formally implemented the landing integration work, including the adjustment and docking of personnel and assets, and the existing TEA system of Tesco in Huarun Cherry management system. < /p >
The < p > second stage is to adjust and optimize the first stage management system integration results by the end of March next year, and improve the operation of Tesco stores. The third stage starts in April next year, and all stores of Tesco will enter the stage of replacement and reopening. It is expected to be completed by the end of March 2016. < /p >
< p > according to the planning of Huarun Wanjia, the national stores of Tesco will be integrated into the management system of Huarun in different stages. Among them, the first is in Southern China, and Tesco Southern China has 16 stores, then it will be incorporated into Huarun Southern China area. Then, North China, East China and other places will be pushed forward one by one. < /p >
< p > "assets, the biggest difference between Tesco and Huarun is that they own large amounts of land assets and separate property management departments." Huarun insiders told reporters, "this will be reintegrated in asset classification management, financial accounting and depreciation treatment." < /p >
< p > according to the previous agreement, Tesco will put 134 stores and 19 shopping malls in the mainland into the joint venture company. Unlike most retailers who rent their property quickly, the Tesco has always been a retailer from the front-end land development, shopping mall construction, post decoration and operation of the whole industry chain. < /p >
< p > in the asset class of Tesco, the "land and permanent land improvement project" takes the first place, and houses, buildings and other types of equipment are all secondary. According to the fusion idea of Huarun Wanjia, the land assets of Tesco will be merged into the housing buildings. < /p >
< p > reporter learned that in the financial calculation of Tesco, the depreciation period of land assets can reach 50 years, while the housing depreciation of Huarun Wanjia is only 25 years. This means that if all the land assets of Tesco are included in the housing structure, it may shorten the depreciation age of some land assets and increase the depreciation cost. < /p >
< p > except for land assets, Tesco has made a long depreciation life for the existing machinery and equipment and fresh equipment. According to the accounting method of Huarun 10000, the depreciation period of these equipments is generally longer. After integration, it will be calculated in accordance with the existing accounting methods of Huarun, reducing the depreciation years of some assets of Tesco, and increasing the depreciation cost of assets to a certain extent. < /p >
< p > < strong > breakthrough "making money difficult" < /strong > /p >
< p > "this will increase the difficulty of making money for the new joint venture on the books." An investment organization analyst said, "the reorganization of assets itself will have a certain degree of attrition, if the reorganization efficiency can not be reflected in time, in the short run will drag Huarun business performance." < /p >
< p > the decline in property valuation has, to a certain extent, dragged down Huarun's net profit. In March, Huarun launched its 2013 annual earnings report, which showed that the company's total turnover increased to HK $146 billion 413 million last year, up 16% over the same period last year. Net profit attributable to shareholders of listed companies fell 51.6% to HK $1 billion 908 million. But after deducting non recurring gains and losses, the company's net profit increased by 7.5% compared to the same period last year. < /p >
< p > 2013, the non recurring income and loss of Huarun venture decreased by 40% to HK $2 billion 647 million, of which the revaluation surplus of investment property decreased by HK $1 billion 890 million compared with the same period last year. The decrease in valuation is mainly caused by the impairment of commercial real estate (i.e. hypermarket) and the depreciation of property. < /p >
In the past 4.7% years, the same store sales of Huarun's retail business still grew by an increase of over the same period last year, compared with last year's P. At present, Huarun Wan operates more than 4600 shops in the mainland, and will add 135 stores after the integration of Tesco. Hong Jie said the sales volume of the new joint venture is expected to reach about 10 billion pounds, or about 95 billion yuan. < /p >
< p > but in the first quarter of this year, the turning point of Huarun retail business came. The total turnover in the first three months was HK $28 billion 10 million, an increase of 8.3% over the same period last year, but its net profit was HK $471 million, down 10.3% during the same period. < /p >
< p > Huarun venture said that the same store sales of group retail business fell by 0.4% year-on-year. The decline is due to the continued downward pressure on domestic macro-economic growth, the declining growth trend of the retail market, the central government's austerity, the widespread impact of advanced merchandise sales, and the impact of e-commerce sales. < /p >
P, a Huarun group insider, told reporters that in the Huarun system, the retail industry will be one of the major challenges in the coming years. In addition, the good cash flow generated by Huarun's retail business and large scale supplier enterprise resources, consumer customer resources and tenant resources also provide strong support for Huarun group's financial sector business. "The integration of Huarun retail sector and Tesco is very important in the Huarun department. It is a test to make money, but the big scale is still the primary goal." The source said. < /p >